Pottstown OKs $6.7M bond for elementary projects

POTTSTOWN — The Pottstown School Board on Thursday approved the final borrowing for the $21 million four elementary schools’ renovation and expansion project. The amount borrowed is $6.7 million.

Although there were no “nay” votes, board member Ron Williams abstained from voting “on principle. I’ve done a lot of internal searching on this and I know the board will continue to support these projects, but I just can’t vote for this.”

L. Gordon Walker from PFM Financial told the board that four firms bid over the Internet on the district’s borrowing from 11:05 a.m. to 11:15 a.m. Thursday morning and that a total of 19 bids were made among the four bidders.

“It’s like a real auction, when you’re buying a piece of furniture or something, and it allows the bidders to compete in real time,” Walker said.

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The winning bid went to Janney Montgomery Scott with an interest rate of 4.34 percent, said Walker.

“We had forecast an interest rate of 4.2 percent, but there was an increase in the market this week,” said Walker, who added that “overall, we’re pleased with the results.”

The district borrowed $6,730,000 but will only receive $6.5 million and the remaining $230,000 will go toward the legal and finance fees, insurance and other costs associated with borrowing large amounts of money.

It will take 21 years to pay back the bond, Walker said, adding that it will cost taxpayers $286,000 per year for the payments.

The borrowing is designed to make payments primarily on interest in the first few years until earlier district borrowings are paid off. This allows the payments to be kept constant over the years, Walker explained.

After five years of payments, the bond is “callable,” meaning that if lower interest rates are available, and it doesn’t cost too much to do it, the district can re-finance the borrowing to save money.

According to the bid documents Walker provided to the school board, the Pottstown School District’s total debt load is now $80.5 million.

Moody’s Investor Service noted that Pottstown’s “debt burden is above average at 3.9 percent of full value, which is higher than both the state and national medians of 3 percent and 1.4 percent respectively.”

However, Moody’s reported that 41 percent of the district’s debt will be paid off within 10 years, adding “we expect the debt burden to moderate over time as all upcoming capital projects have either been fully financed or reserved for by the district.”

Moody’s listed the district’s strengths as “conservative budgeting and financial management” as well as “stable financial operations with satisfactory reserves.”

The district’s financial weaknesses include “moderate reliance on unpredictable state aid” as well as “steady declines in local property values.”

About the Author

Evan Brandt has worked for The Mercury since November 1997. His beat includes Pottstown, the surrounding townships and the Pottstown and Pottsgrove school districts, as well as other varied general topics like politics, the environment and education. Reach the author at ebrandt@pottsmerc.com
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